Herbalife Ltd. (NYSE:HLF) reported second quarter net sales of $1.2 billion. Local currency net sales grew by 1%, while reported net sales declined 11% primarily due to the continuing unfavorable impact of currency exchange rates. Adjusted1 earnings for the quarter were $1.24 per diluted share compared to $1.55 per diluted share for the same period in 2014. On a reported basis, second quarter net income was $82.8 million, or $0.97 per diluted share, compared to $119.5 million, or $1.31 per diluted share for the same period in 2014. Second quarter 2015 diluted EPS was negatively impacted by a $0.412 currency fluctuation.
For the quarter ended June 30, 2015, the company generated $197.6 million in net operating cash flow, and invested $16.2 million in capital expenditures.
The company is raising its adjusted diluted EPS guidance for the year to a range of $4.50 to $4.70, from the previous range of $4.30 to $4.60.
Michael Johnson, chairman and CEO, stated, “The second quarter continued the improving trends we saw in the previous quarter in terms of sales volumes and key sales leader metrics, and we believe we will see these positive trends continue through the second half of the year.”
Johnson continued, “Our Members around the world are more excited and engaged than ever as we invest in innovative new products and enhance our marketing and infrastructure to support their businesses and ensure we are putting customers first in all we do. We continue to see what we believe is the positive impact of the changes we implemented and remain confident that we are creating an even stronger platform for sustainable growth that will deliver long-term value for our shareholders.”
Second Quarter and 2015 Key Metrics3,4
Regional Volume Point and Average Active Sales Leader Metrics
|Volume Points (Mil)||Average Active Sales Leaders|
|Region||2Q’15||Yr/Yr % Chg||2Q’15||Yr/Yr % Chg|
|South & Central America||173.1||-16%||57,868||-7%|
Regional Net Sales and Foreign Exchange (“FX”) Impact
|Reported Net Sales||Growth/Decline||Growth/Decline|
|Region||2Q ’15 (mil)||including FX||excluding FX|
|Asia Pacific (ex. China)||$||239.1||-22%||-17%|
|South & Central America||$||133.5||-34%||0%|
|1 See Schedule A – “Reconciliation of Non-GAAP Financial Measures” for more detail.|
|2 Excludes the impact of Venezuela price increases tied to foreign exchange rate movements.|
|3 Supplemental tables that include additional business metrics can be found at http://www.ir.herbalife.com.|
|4 Worldwide Average Active Sales Leaders may not equal the sum of the Average Active Sales Leaders in each region due to the calculation being an average of Sales Leaders active in a period, not a summation, and the fact that some sales leaders are active in more than one region but are counted only once in the worldwide amount.|
Guidance for the third quarter includes an unfavorable impact from currency exchange rates of approximately $0.40 per diluted share, inclusive of approximately $0.13resulting from Venezuela. Full year 2015 guidance includes a currency headwind of approximately $1.40 per diluted share, including approximately $0.45 from Venezuela.
Based on current business trends the company’s third quarter 2015 and full year 2015 guidance is as follows:
|Three Months Ending||Twelve Months Ending|
|September 30, 2015||December 31, 2015|
|Volume Point Growth vs 2014||(4.0%)||(1.0%)||(4.0%)||(1.0%)|
|Net Sales Growth vs 2014||(10.0%)||(7.0%)||(9.5%)||(6.5%)|
|Adjusted Diluted EPS||$1.00||$1.10||$4.50||$4.70|
|Cap Ex ($ millions)||$40.0||$50.0||$110.0||$130.0|
|Effective Tax Rate||28.5%||30.5%||28.0%||30.0%|
|Currency Adjusted(a) Net Sales Growth vs 2014||1.0%||4.0%||0.5%||3.5%|
|Currency Adjusted EPS (a)||$1.40||$1.50||$5.90||$6.10|
|Free Cash Flow ($ millions) (b)||$470.0||$490.0|
|(a) Excludes the impact of Venezuela price increases tied to FX rate movements.|
|(b) Free Cash Flow equals Cash Flow from operations less Capital Expenditures.|
Guidance excludes the impact of legal and advisory services and expenses relating to challenges to the company’s business model, including expenses related to regulatory inquiries, the impact of non-cash interest costs associated with the company’s convertible notes and the expenses incurred related to the effort to recover costs related to the re-audits that occurred in 2013. Forward guidance is based on the average daily exchange rates of the first two weeks of July. With respect toVenezuela, the guidance assumes a SIMADI rate of 198 to 1 for the remainder of 2015 and excludes the potential impact of the recent and any future devaluation of the Venezuelan Bolivar and future repatriation, if any, of existing cash balances in Venezuela. (Original Source)
Shares of Herbalife surged 3.37% following the earnings released on Wednesday. HLF has a 1-year high of $56.74 and a 1-year low of $27.60. The stock’s 50-day moving average is $52.51 and its 200-day moving average is $43.93.
On the ratings front, Herbalife has been the subject of a number of recent research reports. In a report issued on July 21, Sterne Agee CRT analyst April Scee initiated coverage with a Hold rating on HLF and a price target of $53.89, which represents a potential upside of 6.6% from where the stock is currently trading. Separately, on June 24, Pivotal Research’s Timothy Ramey reiterated a Buy rating on the stock and has a price target of $90.
According to TipRanks.com, which ranks over 7,500 financial analysts and bloggers to gauge the performance of their past recommendations, April Scee and Timothy Ramey have a total average return of 4.7% and 4.3% respectively. Scee has a success rate of 71.4% and is ranked #1435 out of 3724 analysts, while Ramey has a success rate of 56.9% and is ranked #1317.
Herbalife Ltd is a nutrition company. The Companyalong with its subsidiariessells weight management, targeted nutrition, energy, sports & fitness, and outer nutrition products.